Establishing Business Credit

A customer hands over their credit card to a store owner wearing an apron.

Your personal credit report may not be your only credit report. If you own a small business, there also may be a business credit report in your name. A business credit report is a tool used by lenders to make credit-granting decisions for a business.

While business and personal credit reports are similar, there are key differences. For example, the numbers used for business credit scores (0—100) are unrelated to personal credit scores (350—850).

A Business Credit Report contains:

  • Identifying Information
  • Payment Information
  • Public Record Information
  • Inquiries
  • Company Background Information
  • Business Credit Score

Your business and personal credit reports are not linked but they can be related if you secure business debt with personal debt.

The Fair Credit Reporting Act (FCRA) allows lenders, under certain circumstances, to review personal credit histories for business lending purposes. This only applies to businesses that are structured as "sole proprietorships."

As a business grows, separating business from personal credit can help business owners reduce personal credit risk associated with the business.

Many of the rules for building and maintaining good credit apply to both personal and business credit.

Many small businesses have little or no credit history on which to base a decision. Personal credit is used a "reference" for entrepreneurs.

Establishing Business Credit

To establish a business credit score, you first should ensure that your business vendors are reporting your payment history to one of the three major credit reporting agencies. These agencies cannot establish business credit for you.

Business credit relationships can be established through various vendors:

  • Suppliers
  • Wholesalers
  • Manufacturers Bank
  • Leasing Companies
  • Other Financial institutions